If you haven’t declared income in your tax return and think you got away with it – think again. The ATO’s increasingly sophisticated systems means ‘big brother’ has an eye on you.
Recent job cuts at the Australian Taxation Office (ATO) may have people thinking they can get away with lodging incorrect tax returns. However, a very powerful computer system used for data-matching gives the ATO a significant amount of information from other sources. This information is cross-referenced to information in tax returns to catch any discrepancies.
Most taxpayers who use a tax agent to lodge their tax return already understand this to some extent. Tax agents can access interest income, dividend income, PAYG payment summaries and private health insurance details. However the information the ATO receives and its data matching ability go way beyond these relatively simple sources.
The ATO data matching system has the power to compare lifestyle to declared income. For example, information received on boats and cars is compared to declared income to see if lifestyle is comparable to the income included in a tax return.
Below is just some of the information that the ATO is using to cross-check against declared income.
- Credit and debit cards – data is received from all four major banks, the smaller banks, American Express and Diners Club. This data identifies credit and debit-card sales made by Australian businesses to ensure all income has been declared.
- Specialised payment systems – data is collected from electronic payments made to Australian businesses through payment systems such as Ezidebit, EzyPay, PayPal Australia and BPay. This data is analysed in conjunction with the information collected from credit and debit card matching.
- Online selling – transaction data is obtained from Australian online selling sites (including eBay and Gumtree). The ATO targets registered sellers whose trading activity exceeds $10,000 annually, as this may indicate an online business is occurring.
- Share registries and land registries (state and territory based) – data on ownership change is collected from both registries. This information is then matched to capital gains events declared in tax returns.
- Contractor payments – data is collected from payments made to contractors by businesses. This information is used to identify taxpayers who may not be registered correctly and/or not declaring all their income.
- Motor vehicle registries – data is obtained from all state and territory motor vehicle registering bodies to identify all motor vehicles sold, transferred or newly registered with transfer and/or market value exceeding $10,000. This may have implications for GST, fringe benefits tax and claiming fuel tax credits.
- Overseas income and assets – this has been in the news recently following the ATO’s ‘Project DO IT’ last year. There are now data-sharing treaties with many countries around the world including Britain, most of Europe, Asia and the USA. This information is used to identify undeclared income and overseas assets.
There are many other sources of information used by the ATO for data matching in addition to those mentioned above. More than ever, it pays to be honest and upfront. Penalties for undeclared income can be as high as 75% of income omitted, as well as interest charges on the outstanding tax liability.
Please contact your local Accru advisor if you have any questions about how this issue may apply to you.
